Virtually every week there is news of the government involved in a new legal process to see whether our nation’s technology and telecommunications industry is doing something that is anti-competitive or not in the public interest.
Regardless of who is or isn’t sinning, the victim of this struggle must not be the freedom to be innovative. It is becoming clear that the greatest threat to American ingenuity is the heavy hand of government. Whether by oppressive regulation or excessive taxation, government is more likely to stifle and smother new initiatives than any other force.
Three controversies, each slightly different, should command the attention of everyone who really believes in the benefits of competition, consumer choice and innovation. In each, government is attempting to retain its control over the marketplace or establish a new regulatory foothold. And in each, proponents of government regulatory authority are wrong. Their efforts threaten U.S. technological leadership and would diminish consumer choice and open competition.
The stated goal of the Telecommunications Act of 1996 was to create an open, competitive telecommunications marketplace that allowed maximum innovation through expanded consumer choice and added infrastructure investment.
Two years later, the fruits of competition are still denied consumers because the old regulatory ways refuse to die. Government bureaucrats at the Department of Justice and the Federal Communications Commission are doing what comes naturally: using the act as a diagram for developing massive sets of new rules to micromanage the development of competition. Despite this explosion of regulation, the FCC has still failed to provide specific rules where they are really needed.
The second threat to innovation involves federal attempts to regulate the emerging area of information services, such as E-mail, voice mail and the Internet. In the Telecommunications Act of 1996, Congress declared its intent “to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by federal or state regulation.” Yet today the administration is urging the FCC to regulate those same services under the universal service provisions of this “deregulatory” act.
Congress was exactly right to mandate that the Internet not be regulated. Many of my colleagues and I are fighting to keep the Internet from regulation and taxation.
The third example, again an attempt to expand federal regulatory authority into new areas, comes under the guise of antitrust enforcement. The Justice Department is claiming the right to control Microsoft’s process for updating and expanding its Windows operating system.
About 90% of the personal computers in the world are shipped with Microsoft’s Windows 95 operating system. With such an enormous market share, Microsoft certainly has the ability to engage in anti-competitive behavior. Therefore the government must ensure that Microsoft complies with a 1995 consent decree that prohibits the company from tying together the licenses of two separate products. However, last month a federal appeals court found that Microsoft did not violate the consent decree, as charged by the government. The court reaffirmed the industry’s right to integrate new technology into its products. Any more involvement by the government in the future development of the software industry could lead to unintended and harmful consequences.
Freedom to innovate has made our technology industries the envy of the world and the driving force behind America’s economic renaissance of the last decade. Giving the government regulatory control over the Internet, whether under the excuse of aiding universal telephone service or disguised as “trustbusting,” would hurt consumers, competition and America’s technology leadership. U.S. companies have a 75% share of the global software market. The Japanese technology industry, on the other hand, has indeed suffered because of excessive government intervention.
Congress has begun to deregulate industries such as telecommunications because doing so encourages breakthroughs and benefits consumers. It only works, however, if the FCC and other bureaucracies follow congressional policy and take government’s heavy paws off the creative energies of America’s innovators.